I recently spoke with Brett Griffith, second generation owner and former President of Alpha Systems. The company, which completed the sale of its business operations in November 2014, is headquartered in Huntingdon Valley, Pennsylvania and provides data and document solutions to the healthcare and legal industries. I had the opportunity to speak with Brett about his views on succession planning of a family business.
You recently completed the sale of your company – what advice do you have as it relates to planning the succession of a family business?
As business owners and leaders, we should be looking at succession planning as a vital part of our role. Although there are many components of a succession plan, perhaps the key decision is whether to sell your business, transition it to family members, or structure an employee buyout.
How would you suggest family business owners start the process?
There are a few questions that may be helpful in determining the best course of action for the plan. They include:
- How long do you anticipate working in your current role?
- Do you have a plan in place to transition your position to another qualified person?
- If so, are there any goals or timeframes in place to ensure the plan will be met?
- What lifecycle is your business in right now?
- What are the longer-term projections in your market?
- Do you have the capital and talent to compete and thrive over the long-term?
Do you have advice for family businesses that do not have a strong successor candidate?
If you do not have the talent in place or it will be very difficult to obtain, or you do not have any family members interested in coming into the business, you may need to explore selling the business. There are several options for selling your business, including a management buyout, an ESOP, or selling to a strategic or financial buyer. Each option has its own pros and cons, which your business advisors and accountants can help you explore in more detail.
As a family business that recently went through the sale of the business, what are some lessons learned?
There were a few lessons I would pass along to other family business owners:
- Be sure to budget some time to think about your transition strategy. This includes taking into account what is best for your family, employees, and clients.
- Time passes very quickly. It is vital that you keep your exit strategy updated. If you decide to sell your business, review the due diligence items and keep them in order well in advance of the sale. This includes items in the areas of accounting and finance, human resources, and operational practices.
- To maximize the value of the business, make sure your client contracts are up to date and ideally long-term in nature. Also, we found that buyers were very interested in the three year history of strong cash flows and earnings, as well as positive projections for the future.
- Lastly, spend time to think about how you as the owner will best thrive post-transaction. Give consideration to whether you want to stay with the business either full-time, as a part-time consultant, or even retire.